Natoya Hill, left, looks at a 2013 Nissan Sentra with the help of Sales & Leasing consultant Gregory Garth Thursday at Five Star Nissan of Albany on Oglethorpe Blvd.
ALBANY, Ga. — While House Bill 386 is generating quite a stir as its March 1 implementation date approaches, particularly for its impact on the way the state collects motor vehicle taxes, most Georgians are unaware of the far-reaching impact of the bill.
HB 386 is expected to have a huge positive impact on Southwest Georgia’s economy in general, on the area’s car dealerships specifically. And while the good news will be celebrated up and down Albany’s Motor Mile and at other automobile dealerships, there’s even a measure of good news in the bill for Joe Q. Citizen.
“We’re still working on the details, but I offer the analogy of steering a ship,” House District 152 Rep. Ed Rynders, R-Leesburg, said of the legislation. “Before you get things right, you have to make some adjustments. The Legislature is making adjustments as we speak on some of the unintended consequences of the bill — such as the cost of leasing vehicles — but once we get the ship going, we’ll get it on the right path.”
Dougherty County Tax Director Denver Hooten said it’s important for the car-buying public to understand the provisions of HB 386 so that they aren’t caught unaware when purchasing a vehicle, whether new or used.
“The biggest change,” she said, “is in casual sales of vehicles in the state. In the past, caual sales — sales that don’t involve licensed dealers — have not been taxed. Research shows that from 50 to 55 percent of all car sales in Georgia are casual sales.
“Under HB 386, before a person can obtain a title in the state of Georgia for a vehicle he bought from a non-dealer, he must pay a 6.5 percent flat fee based on the value of the vehicle. That’s where we’ll have initial problems. If citizens aren’t aware of the new law, they’ll be surprised — and I’m sure some will be angry — to find out they have to pay that fee.”
For automobile dealers, the law is expected to level a playing field that their representatives say has long left them at a disadvantage.
“You see different numbers, but research I’ve read shows that as many as 60 percent of all car sales in the state are casual sales,” John Prince, owner of Tifton-based Prince Automotive Group and of Prince Chevrolet in Albany, said. “Because dealers must charge a 7 percent tax on sales in Georgia, they’re at a big disadvantage.
“I think (HB 386) is going to be good for dealers and a great thing for the state and for the counties in Georgia. There’s going to be more (tax) money coming in. You start collecting taxes on 60 percent of the automobiles sold in the state, that’s going to be a tremendous amount of revenue. I’ve heard some people complaining about this already, but why wouldn’t Georgia do it? It’s one of only three states that doesn’t collect taxes for casual sales.”
Hooten, who talked with The Albany Herald after making a preliminary presentation on the new motor vehicle tax before the Dougherty County Commission Monday, said HB 386 eliminates the motor vehicle “sale and use tax” in favor of a title ad valorem tax on vehicles sold after March 1. Instead of the 7 percent rate currently charged, the new tax will start at 6.5 percent this year, increase to 6.75 percent next year and to 7 percent the next.
“The Legislature has the processes in place to go up to 9 percent if they see a need to,” Hooten said.
Additionally, taxes paid on tag renewals each year — the so-called birthday tax, based on the millage rate in a car owner’s county of residence — will go away for all new car owners under HB 386. Only fees of around $38 will be due upon renewal.
Owners of vehicles — new and used — purchased between Jan. 1, 2012 and March 1 can opt to register their vehicle under the new law, but Hooten suggests looking at individual circumstances before making a decision.
“If you’ve already paid taxes, on the purchase and on your tag, and the amount is greater than the 6.5 percent (under the new law), you may be able to opt in at no cost,” she said. “Any ad valorem tax paid (on vehicles) can be applied as credit.
“But if someone plans to keep their car for only a year or two, it might not make financial sense for them to do so.”
(To opt in online, go to www.etax.dor.ga.gov, click on “motor vehicle” and follow the prompt to “tax calculator.”)
The 6.5 percent tax on casual sales, which is based on Kelly Blue Book value of the vehicle, can be appealed to the Board of Tax Assessors, much as property owners can appeal their assessed property values.
“There may be a compelling reason that the actual value of the vehicle is less than the Blue Book value,” Hooten said. “An owner will have to pay the tax based on the estimated value, and if he wins his appeal the money will be refunded.”
Hooten warns that owners of vehicles purchased before Jan. 1, 2012 will continue to pay taxes as they currently exist.
“The first time you hear about all this, it can be overwhelming,” she said. “Once you get into it, though, it’s pretty simple, for the taxpayers and for the tax office.
“The biggest potential problem I see is that transactions will now take longer. The lines will probably be longer at the tax office. We just ask people to be patient as we all get used to the new process.”